On November 26, 2014, the U.S. Department of Health and Human Services (HHS) released its proposed Notice of Benefit and Payment Parameters for 2016, also known as the “Payment Notice.” Now that HHS has completed the majority of its major rulemakings implementing the Affordable Care Act, the annual Payment Notice has become the recurring opportunity for HHS to modify Affordable Care Act (ACA) policy in a wide variety of subject areas. The 2016 Payment Notice touched on a number of policies, including essential health benefits (EHB), rate review, network adequacy and discriminatory benefit design, among others. Below is a summary of some of the key provisions of the 2016 Payment Notice.

Essential Health Benefits

Section 1302 of the ACA requires all non-grandfathered health plans in the individual and small group markets provide EHB to their beneficiaries. EHB are a comprehensive set of health care items and services. The Secretary of Health and Human Services defines the EHB to be covered; however, at a minimum, EHB must be equal in scope to the benefits covered by a typical employer plan and cover at least 10 general categories. The 2016 proposed Payment Notice would make several changes to the EHB regulations.
First, HHS proposes to establish a universal definition for one of these 10 general categories of care: habilitative services. Currently, issuers are required to match the habilitative services provided by the appropriate base-benchmark plan. When the base-benchmark plan does not offer habilitative services, the state in which the issuer is located may specify the services that are included in that category. If no definition is provided, however, the issuer is obligated to provide habilitative services benefits that are similar in scope, amount, and duration to benefits covered for rehabilitative services or to determine which services will be covered and report the determination to HHS. The proposed rule would alleviate this challenge for issuers by defining habilitative services as “health care services that help a person keep, learn, or improve skills and function for daily living.” Additionally, HHS proposes to remove the option for issuers to determine the scope of habilitative services under 45 C.F.R. § 156.110(c)(6).

Second, HHS wants to clarify that pediatric services should be provided until at least age 19. HHS proposes new language in 45 C.F.R. § 156.115(a) to clarify that coverage for pediatric services should be provided until at least the end of the plan year in which an enrollee turns 19.

Third, HHS proposes to give states the option of selecting a new 2014 plan to serve as their base-benchmark plan for the 2017 plan year. The proposed rule reinstates unintentionally deleted data submission requirements used to determine potential state benchmark plans.

Fourth, HHS seeks to redefine another EHB required category: prescription drugs. Under current regulations, plans providing EHB are required to cover the greater of one drug per United States Pharmacopeia (USP) category or class or the same number of drugs in each USP category and class as the state’s EHB benchmark plan. HHS proposes to replace this drug count standard with a requirement that issuers adopt a pharmacy and therapeutics (P&T) committee to ensure the plan’s formulary covers a sufficient number and types of prescription drugs. The proposed rule includes standards for these P&T committees. HHS indicates that it is considering adopting another drug count standard based on the American Hospital Formulary Service (AHFS), either as an alternative to, or in conjunction with, the P&T committee proposal.

Discriminatory Benefit Design

The preamble of the proposed Payment Notice also addresses ACA Section 1302(b)(4)’s bar on discriminatory benefit designs in EHB in 45 CFR § 156.125. Section 156.125 provides that an issuer does not provide EHB if its benefit design, or the implementation of its benefit design, discriminates based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions.

In the preamble of the proposed rule, HHS cautioned that while some issuers maintained limits and exclusions included in their State EHB benchmark plans, such benchmark plans may not include all requirements effective for plan years on or after January 1, 2014. Because of possible noncompliance in the benchmark plans, CMS advised issuers to design their plan benefits to comply with those requirements and limits that applied to plans beginning in 2014.

The preamble also addressed a perceived loophole in the EHB requirements: an issuer may ostensibly offer compliant benefits but apply certain restrictions that effectively deny those benefits to potential enrollees based on age, disability, or other factors, which is impermissible discrimination. In the preamble to the proposed rule, HHS outlined several examples of potentially discriminatory benefit designs:

  • It would be arbitrary, and impermissibly discriminatory, to limit hearing aid access to members who are under six years of age, since older members might also have a medical necessity for a hearing aid.
  • It would be discriminatory for an issuer to refuse to cover a single-tablet or extended-release prescription drug regimen that is customarily prescribed and is just as effective as a multi-tablet regimen—absent an appropriate reason for the refusal—because such a plan design discriminates against, or discourages enrollment by, individuals who would benefit from the alternative therapeutic options.
  • If an issuer places most or all drugs that treat a specific condition on the highest cost tiers, this plan design effectively discriminates against, or discourages enrollment by, individuals who have those chronic conditions.
  • And finally, if a QHP makes certain drugs available only by mail order, this would discourage enrollment by, and thus discriminate against, transient individuals and certain individuals who have conditions that they wish to keep confidential.

HHS also indicated that it will examine an issuer when one of its qualified health plans (QHPs) reduces benefits for a particular group. HHS will notify an issuer if it sees a reduction in the generosity of a benefit for subsets of individuals when such a reduction is not based on clinically indicated, reasonable, medical management practices. As part of this examination, issuers may need to submit justifications to HHS or the issuer’s respective state explaining how the plan design is not discriminatory.

Rate review

HHS proposes a few changes in the federal rate review program that represent a significant expansion in the role of the federal government in this area. The proposed rule expands the number of proposed rate filings subject to the reasonableness review by requiring consideration of rate increases at the plan level rather than the product level when determining whether the increase is subject to review. The proposed rule notes that if an increase in the plan-adjusted index rate for any plan within a product in the individual or small group market meets or exceeds the applicable threshold, all plans within the product would be subject to review for reasonableness.

The proposed rule also seeks to establish a uniform timeline by which health insurance issuers must submit rate filing information to HHS and the State, as appropriate. Specifically, health insurance issuers would have to submit the Rate Filing Justification by the earlier of the state’s filing deadline for proposed rate increases or the date specified by the Secretary. HHS indicated it is considering specifying a deadline to coincide with the end of the QHP application window for the federally-facilitated exchange.

The proposed rule would amend Section 154.301(b) to specify the timeframe and manner for a State with an effective Rate Review Program to provide public access to information about proposed and final rule increases if it chooses to do so. The proposed rule would require that, for states that elect to post information about rate increases on their website, they must make information posted about either proposed or final rate increases uniformly available—without regard to whether coverage is offered through or outside an exchange. A state electing to post proposed rates would need to do so no later than the date specified by the Secretary. The agency is considering specifying a deadline of 10 business days after receipt of all rate filings in the relevant state market for posting information regarding proposed rate increases. A state electing to post final rates would need to do so by no later than the first day of the annual open enrollment period.

A state that intends to post information about proposed rate increases before the date specified by the Secretary or final rate increases prior to the first day of the annual open enrollment period must notify CMS in writing, no later than 30 days before the date it intends to make the information public. According to the Agency, the purpose of these provisions is to better coordinate and manage public expectations regarding the available of rate information. To states, these provisions will likely feel like federal government overreach in an area where states often have established processes and statutes that often dictate when rate filing information is made public. The Administration has been criticized recently for failing to make rate filing information public and holding off publishing final 2015 rates until after the election. These proposals likely won’t provide any comfort to those critical of the agency’s lack of transparency as they tend to support the current story line.

Network Adequacy

Section 1311(c)(1)(B) of the ACA requires the Secretary to establish minimum criteria for provider network adequacy that health and dental plans must meet to be certified as a QHP.

Section 156.230(a) specifies that 156.230 only applies to QHPs that use a provider network, which includes only providers that are contracted as in-network. HHS emphasizes the importance of strong network access and notes that before proposing significant changes to network adequacy policy it intends to wait for the recently formed NAIC’s workgroup model act relative to network adequacy. In the meantime, for 2016, HHS intends to continue using the reasonable access standard adopted in the 2015 Letter to Issuers in the Federally-facilitated Marketplaces. Although it is not in the text of the proposed rule, HHS urges QHP issuers that use a network of providers to offer new enrollees transitional care for an ongoing course of treatment beginning with the new enrollee’s effective date of coverage and lasting for at least 29 days thereafter.

Section 156.230(b) strengthens the provider directory requirement. It proposes that a QHP issuer must publish an up-to-date (updated at least monthly), accurate, and complete provider directory, including information regarding which providers are accepting new patients, the provider’s location, contact information, specialty, medical group, and any institutional affiliations. Under the proposed rule, a provider directory is considered easily accessible when the general public can view a plan’s current providers on its public web site without having to create or access an account or enter a policy number. In order to allow third parties to create resources that aggregate information on multiple plans, HHS is considering requiring issuers to make this information publicly available on their web sites in a machine-readable file or requiring issuers to submit such information in a specified template.

Essential Community Providers

Section 1311(c)(1)(C) of the ACA requires that a QHP’s network include Essential Community Providers (ECPs), where available, that serve predominantly low-income and medically-underserved populations.

Section 156.235(c) provides a new definition of an ECP: a provider that serves predominantly low-income, medically underserved individuals including entities defined in section 340B(a)(4) of the PHS Act and providers described in section 1927(c)(1)(D)(i)(IV) of the Social Security Act as set forth by section 211 of Pub. L. 111-8. HHS proposes that beginning in plan years 2016, ECPs include: 1) not-for-profit or State-owned providers that would be entities described in section 340B of the PHS Act but that do not receive Federal funding under that section, 2) not-for-profit or governmental family planning service sites that do not receive a grant under Title X of the PHS Act, and 3) other providers that provide health care to populations residing in low-income zip codes or Health Professional Shortage Areas.

Because HHS believes that specifying a quantitative standard will assist issuers in ensuring that they are providing sufficient consumer access to ECPs, pursuant to 156.235 (a)(2)(i), beginning with the 2016 benefit year, a health plan seeking certification to be offered through a Federally Funded Exchange (FFE) must satisfy the general ECP standard set forth in in paragraph 156.235 (a)(1) (i.e., the network must include a sufficient number and geographic distribution of ECPs). Additionally, under 156.23(a)(2)(ii), the issuer of the plan seeking certification as a QHP in an FFE would be required to offer contracts for participation in the plan for which a certification application is being submitted to: 1) All available Indian health providers in the service area, applying the special terms and conditions necessitated by Federal law and regulations as referenced in the recommended model QHP addendum for Indian health providers developed by HHS, and 2) at least one ECP in each ECP category (e.g., Federally Qualified Health Clinics, Ryan White providers, family planning providers, hospitals and other ECP providers) in each county in the service area, where an ECP in that category is available and provides medical or dental services that the issuer plan type covers.

Section 156.235 (a)(3) specifies that if an issuer’s QHP certification application to the FFE does not satisfy 156.235 (a)(2), the issuer must include as part of its application a narrative justification explaining how the provider network(s) provide an adequate level of service for individuals in low-income zip codes or Health Professional Shortage Areas within the plan’s service area and how it will strengthen the plan’s provider network before the benefit year begins.

Section 156.235 (b)(1) provides the alternate ECP standard referenced in § 156.235(a)(5). Pursuant to 156.235 (b)(2), those plans seeking QHP certification in FFEs must have a sufficient number and geographic distribution of employed or contracted providers by demonstrating in its QHP application that the number of its providers in specified locations satisfies a minimum percentage a percentage, specified by HHS, of the number of available ECPs in the plan’s service area. Section 156.235 (b)(3) states that if a QHP certification application of a plan for the FFE does not satisfy the alternate ECP standard described in 156.235 (b)(2), the issuer must include as part of its QHP application a narrative justification describing how the issuer’s provider network(s) provides an adequate level of service for low-income and medically underserved enrollees.

The proposed Payment Notice is open for comment on all of the proposed provisions until December 22, 2014.

Joseph Bui, Shelley Rosenberg, and Avi Rutschman also contributed to this post.